Britain’s retail recovery slowed sharply this month as the second wave of the Covid-19 pandemic persuaded many shoppers to hold back on planned purchases.
The loss of momentum, which affected retail and wholesale businesses, cut short a surge in sales during the third quarter and signalled a flatlining of the broader economy, which has relied heavily on consumer spending to boost growth.
The Confederation of British Industry’s (CBI) monthly retail sales index fell to -23 in October, its lowest level since June, after hitting an 18-month high of +11 in September. A Reuters poll of economists had pointed to a reading of +1. The index is based on a balance of responses from retail and wholesale firms.
The CBI report follows other surveys in recent days that show consumer confidence declined sharply this month amid a second wave of Covid-19.
A reluctance to maintain the summer spending spree through the autumn months reflected increased restrictions on household activity in many parts of the country, rising unemployment, cutbacks in government support for furloughed workers and mounting consumer caution.
In response some supermarkets have embarked on a price war to attract customers while many retail chains have reduced the number of shops and cut staff.
A survey by the market research firm GfK reported a relapse in consumer confidence in October, while the latest data from the consultancy Springboard revealed shopper footfall across high streets and shopping centres fell 3.1% in the week to 17 October – a fourth successive decline.
Ben Jones, a CBI economist, said: “The fall in retail sales in October is a warning sign of a further loss of momentum in the economy as coronavirus cases pick up and restrictions are tightened across many parts of the country.”
He warned retailers faced a difficult Christmas trading period. Retailers’ expectations for sales in November fell sharply and they increasingly expect to cut orders to suppliers, the survey showed.
Official figures for September showed retail sales increased for the fifth consecutive month in September amid a rise in spending on DIY and household goods.
The Office for National Statistics said the volume of retail sales rose by 1.5% between August and September, continuing a recovery in consumer spending from the biggest slump on record during the coronavirus lockdown earlier this year.
Howard Archer, the chief economic adviser to forecasting group the EY Item Club, said: “Retail sales volumes rose a record 17.4% quarter-on-quarter over the third quarter, reinforcing belief that consumer spending played a leading role in the economy’s bounce back.
“October’s softer CBI survey suggests the environment for retail sales and consumer spending will be more challenging in the near term at least. The fundamentals for consumers have taken a clear downturn as a result of Covid-19, and they are likely to remain under pressure in the near term at least.
‘Many people have already lost their jobs despite the supportive government measures, while others will be concerned that they may still end up losing their job as the furlough scheme ends this month,” he added.
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